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DOL Fiduciary News: June 27, 2017

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LPL bars hybrid RIAs from making 401(k) rollover recommendations as a broker

InvestmentNews; June 26, 2017 @ 5:13 pm

LPL Financial, the largest independent broker-dealer in the U.S., is no longer allowing hybrid advisers to recommend rollovers to clients in a brokerage capacity, under a new policy adopted in response to the Labor Department's fiduciary rule.

The firm has adopted an "education-only policy with respect to rollovers," meaning hybrid advisers may only have "general, educational conversations with investors and may also accept investor-directed rollovers," according to an internal adviser memo obtained by InvestmentNews.

"LPL Financial advisors are prohibited from recommending that investors roll out of a [401k] plan. Instead, financial advisors may educate investors on the available options regarding their plan assets (e.g., take a distribution, leave assets in the plan, roll over to another plan with a new employer, or roll their assets into an IRA)," according to the memo.

Advisers find hidden opportunities in the fiduciary rule

Financial Planning; June 26 2017, 12:34pm EDT

Weeks after its implementation date, the fiduciary rule enjoys broad support among clients as well as advisers. What's more, planners report they're seeing a boost to the bottom line.

That silver lining is a direct result of how firms responded to the regulation. Companies introduced new employee training programs, compensation structures, and technology systems among other initiatives, according to a new study by Boston-based research firm Aite Group.

Among RIAs, 81% say that they favor either keeping the fiduciary rule as is, or preserving the rule in a modified form, indicating "that they see benefits to elevating the standards across the business," writes Denise Valentine, the author of the report.

Since RIAs are already subject to fiduciary requirements, the impact of the rule will generally be more modest for them than broker-dealers and other types of advisers, Valentine observes.

Other States Considering Their Own ‘Fiduciary Rules' After Nevada’s Becomes Law; June 26, 2017

Nevada state Sen. Aaron Ford said he’s been contacted by several politicians from other states since his bill holding financial advisors to a fiduciary standard was signed into law June 2. Even though the Department of Labor’s retirement-savings rule took partial effect this month, and will be fully implemented Jan. 1, 2018, its future is still tenuous, as some Trump administration officials have said they want to overturn it.

So some politicians at the state level are interested in passing legislation similar to Nevada’s, Ford said.

He declined to say who approached him, because he was not aware of any drafts of legislation that had been made public. Most state legislative sessions have also ended for the summer, so work on any potential bills will likely be slow.

The DOL’s rule and Nevada’s new law accomplish the same primary goal of their proponents: to hold financial advisors to a fiduciary standard (rather than the current suitability standard) when advising clients on their retirement accounts.

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